New vs Old Tax regime
1. What is old tax regime?
Old tax regime is a method of taxation in which individuals can claim all the eligible exemptions and deductions (such as house rent allowances, standard deduction, 80C investments, etc.)
The tax rates would be as under:
The basic exemption limit of Rs. 2,50,000 stands increased to Rs. 3,00,000 for resident senior citizens (aged more than 60 years) and to Rs. 5,00,000 for resident super senior citizens (aged more than 80 years).
2. What is new tax regime?
New tax regime is a method of taxation in which individuals cannot claim any exemptions and deductions. To compensate for this, the tax rates would be lower compared to old tax regime.
The tax rates would be as under:
Tax rates in the new tax regime is the same for all categories of Individuals, i.e., Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years, and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit is available to senior and super senior citizens in the New Tax regime.
3. Which tax regime is beneficial?
Tax should be worked out under both the regimes to know which one is beneficial.
If a person is claiming allowances in salary and has investments which qualify for 80C deductions or housing loans, old regime may be beneficial.
If there are no such investments, then new regime which offers lower tax rates may be beneficial.
It is also important to consider which regime is beneficial in the long term if the individual falls under the category wherein switching between old and new regime is restricted.
4. I have declared new tax regime in my Form 16 to my employer and the TDS was done accordingly, but now I understand that with my current investments and deductions, old regime is favourable to me, can I change to old tax regime?
Yes. At the time of filing the income tax return, you can choose old or new tax regime whichever is favorable to you, irrespective of what you have declared to the employer.
5. I have opted for new tax regime in previous year, can I change it now to old tax regime?
If the individual does not have business/professional income, then the option to choose between old and new tax regimes is available every year.
If the individual has business/professional income, the switching between regimes is restricted. In such cases, once new tax regime is chosen, the same shall have to be continued for all the subsequent years. The option to go back to old tax regime is available only once thereafter.
6. How to switch to new tax regime?
Individuals should file Form 10IE to switch to new tax regime. The form should be filed before filing ITR and within the due date for filing ITR.
7. Can I opt to file in new tax regime while filing return of income after the due date?
No. The benefit of filing income tax return in new tax regime cannot be claimed if the return is filed after the due date.
